Coronavirus: 'Buyers should release £4.5bn in retention payments'

An engineering trade body has called on buyers to release £4.5bn currently being withheld from contractors in the form of retention payments.

The UK Building Engineering Services Association (BESA) said the move was needed to “inject much-needed cash into struggling construction supply chains” during the coronavirus outbreak.

David Frise, chief executive at BESA, said: “The current crisis has provided a sharp reminder that cash is king in this industry.

“Any measures that can get cash flowing more rapidly through supply chains will be crucial to ensure our sector can keep delivering on its promise to support essential services with vital building services.”

BESA said it supported the latest advice for public buyers from the UK government concerning payments on construction contracts.

In guidance notes released alongside a Procurement Policy Note covering supplier relief during the outbreak, the Cabinet Office (CO) said contracting authorities “may consider the release of a retention where the works have been completed in substance”.

“Contracting authorities should carefully consider whether retentions can be released early on a case-by-case basis,” said the guidance.

“The premature release of retentions by an authority may result in the authority taking on significant risks which are not in its control and which are inappropriate for it to bear (for example, serious defects which may only come to light once the authority has the time and resources to satisfy itself that the works have been completed to the required standard, or latent defects).”

The CO said authorities “may want to consider operating project bank accounts” during the outbreak.

The guidance also suggested options to support suppliers including accelerated payment of invoices, amending existing payment mechanisms to make more regular payments, and the provision of advance payments.

BESA said cash retentions typically amounted to up to 5% of payments.

Meanwhile, Taylor Wimpey has announced a scheme where it will pay subcontractors up to £600 per month for three months, on the basis the cash will be recovered from future work carried out. The housebuilder has so far capped the scheme at £5m, which will support around 2,750 individuals.